COLD FUSION OCCURS WHEN TWO NUCLEI WITH VERY SMALL RELATIVE ENERGY TUNNEL THROUGH THEIR RELATIVE COULOMB BARRIER TO INITIATE A NUCLEAR REACTION. RECENT REPORTS OF COLD-FUSION BETWEEN HYDROGEN ISOTOPES EMBEDDED IN PALLADIUM AND TITANIUM HAVE AROUSED A LOT OF ACTIVITY IN THIS AREA. TO ACHEIVE THE RATE OF NEUTRON PRODUCTION (?10(-23S-1) PER DEUTERON PAIR) REQUIRES THE SOLID STATE ENVIRONMENT TO PRODUCE EITHER AN UNUSUAL ENHANCEMENT OF FUSION REACTION RATE OR A LARGE SUPPRESSION OF COULOMB BARRIER BETWEEN DEUTERONS. AS OF NOW THERE IS NO RELIABLE THEORY WHICH CAN CALCULATE THE FUSTION REACTION RATES IN LATTICE. WE PROPOSE TO DEVELOP A RELIABLE THEORY FOR THIS PURPOSE USING QUANTUM AND STATISTICAL MECHANICS FOR WHICH WE HAVE GREAT EXPERIENCE AND EXPERTISE. WE WILL DEVELOP THEORY TO CALCULATE RELIABLE POTENTIAL AND WAVE FUNCTIONS OF DEUTERIUM AND LITHIUM IN PALLADIUM LATTICE AND DEVELOP THEORIES FOR ELECTRON SCREENING AND MANY-BODY FLUCTUATIONS. THE POSSIBILITY OF THE PRESENCE OF EXOTIC PHENOMENA WILL BE STUDIED. ESTIMATES BASED ON OUR THEORY WILL GIVE DEFINITIVE ANSWERS TO THIS HIGHLY DEBATED AND MOST INTERESTING TOPIC.